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We will always read the prospectus to determine the published costs of any fund we are considering.
We will always know a fund’s turnover so that we have an idea of the fund’s hidden transaction costs—the higher the turnover, the higher the cost is likely to be.
Two sources of mutual fund income are subject to tax—dividends and capital gains.
Both have different tax rates.
The act reduced the tax on “qualified” dividends, the kind paid by most large U.S. corporations.
Reconciliation act 2003
The lower rates on qualified dividends increase the tax-efficiency of stocks relative to bonds whose yield is taxed at ordinary income tax rates. For this reason, and the fact that stocks benefit from the lower capital gains tax rates, we generally recommend placing stocks in taxable accounts and bonds in tax-advantaged accounts.
tax-managed funds.
A good source for locating a fund’s tax efficiency rating is www.morningstar.com.
Mutual fund tax efficiency, which is generally low in bull markets and high in bear markets, can result in misleading assumptions if measured over short periods of time.
Bull market goes up. Bear goes down
Use only long-term holdings in taxable accounts.
Use index or tax-managed funds in taxable accounts.
redemption fees.
distribution date.
Distribution date is when funds file for taxes.
There’s usually no sense in paying taxes any earlier than we have to.
Unless you expect your income to go up next year
Use $3,000 of the balance (the maximum allowed) to reduce your income reported on the first page of your current income tax return. You are then left with a $1,000 tax-loss balance.
If you decide you want to repurchase your losing fund, you must wait 31 days to avoid a disallowance of your tax loss—called a wash sale. During the 31-day interim period, you can put the proceeds from the sale of the losing fund into a money market fund. Some investors fear being out of the market for 31 days. In that case, buy a similar (but not identical) fund during the 31-day waiting period.
Let’s assume you’re in the 28 percent federal income tax bracket and are considering a 5.75 percent tax-exempt bond fund. In order to see how this 5.75 percent yield compares with the after-tax yield of a similar taxable fund, you simply divide the yield (5.75 percent) by 0.72 (1 less 0.28). The result is 7.99 percent. If an equivalent taxable bond fund is yielding more than 7.99 percent, it’s the better buy; if under 7.99 percent, the tax-exempt fund is probably the better choice.
401(k) Summary Plan Description (SPD)
R-squared
Correlation number between mutual fund and a market index.
R-squared
bonds must be titled in one or both of the parents’ names; they cannot be titled in the child’s name.
Us savings bonds
IRS Publication 970
https://www.irs.gov/pub/irs-pdf/p970.pdf
Every state has a 529 plan of one type or another, and some offer both prepaid and savings plans. You can get the specifics on each state’s 529 plan at www.savingforcollege.com/.
Research the 529 options bbbbb
In addition, there’s a wealth of free information available in IRS Publication 970 (Tax Benefits for Education).
Read the PDF to get more details
Paralysis by analysis
